Down the road, on the banks of the River Desaguadero that feeds into the
lake, people are also busy trading, but the quality of the exchange is
quite different.

Two men are loading a small white, red and blue boat on the Bolivian bank
of the river.

About 50m away, on the Peruvian side, Cecilio Flores is anxiously waiting
to load his precarious tricycle with the 20-litre barrels being hauled
aboard.

Government subsidiesMr Flores transports up to 10 loads
of subsidised Bolivian diesel oil each day.

(right-
map)

"I can make about one [Peruvian] sol per litre. If you multiply that
by the 200 litres I am about to get, I make about 200 soles (£34;
$70) per load," he told the BBC.

"And the guys that are carrying it from the Bolivian side make about
the same. It is good business for poor countries like ours," Mr Flores
said. "Bolivian oil is just too cheap to be true."

Government subsidies mean Bolivia has the lowest retail price for oil
in South America - about 50 US cents a litre.

Those subsidies have boosted the smuggling business, as the price of diesel
oil in border countries such as Brazil and Peru, are up to four times the
Bolivian price.

Bolivia is South America's poorest country but has the second-biggest
reserves of gas and oil after Venezuela.

Energy crunchIn May 2006, Bolivia's first indigenous president,
Evo Morales, nationalised its oil and gas resources to "return them to the people".

"Smuggling is a national habit, but
we are going to suffer from it as long as we keep prices artificial."

--Carlos Toranzo

But officials now realise that oil smuggling is having a big effect.

In recent months, supply has been too limited to satisfy the needs of
the population, and with the southern hemisphere's winter approaching,
for many there are fears of an energy crunch.

"The problem is now directly affecting the Bolivian state," said
Colonel Ramiro Mendoza, head of customs operations.

Given the impact of smuggling on state revenues, Mr Morales' s government
has moved to tackle the crime, including running a major television advertising
campaign and having military patrols at petrol stations.

"We see we are almost subsiding
neighbouring countries with cheap oil"

--Carlos Villegas
Hydrocarbons Minister

"We are losing about 300 cubic metres of diesel oil a day," said
Carlos Villegas, the minister of hydrocarbons.

That represents about $55m in annual losses for the Bolivian state, which
every year subsidises the oil industry to the tune of some $190m.

As international oil prices hover over $100 a barrel, the Bolivian government
is keeping the price of crude oil at $27.11.

To meet domestic demand, the authorities have to import 30% of the country's
needs, mostly from key partner Venezuela, at international prices.

That seems to be the root of the problem.

"The Bolivian state is turning into a protectionist one, fixing oil
prices that do not match international market prices," said Carlos
Toranzo, an economist at the Latin American Institute of Social Research
in La Paz.

"Smuggling is a national habit, but we are going to suffer from it
as long as we keep prices artificial," he said.

New refineriesThe government recognises the scale of the
problem.

"As price differences are so significant, we see we are almost subsiding
neighbouring countries with cheap oil of ours that leaves the national
territory illegally," said Mr Villegas.

But it seems the challenge of producing oil has taken precedence over
clamping down on smuggling.

"What we are going to do is to expand two refineries and set up a
new one. This will allow us to be self-sufficient despite smuggling. But
we won't get there until the year 2010 or 2011," Mr Villegas said.

But for some this is not an issue that supply will solve.

"The problem is having artificial prices that are too seductive for
smugglers," said Mr Toranzo.